Lebanon’s small and medium enterprises have been witnessing steady growth in profits despite a tougher economic climate, the chairman of Kafalat SAL said in an interview over the weekend.

“Kafalat-guaranteed loans have reached LL248,670 million ($165 million) in 2011, benefiting some 1,415 SMEs across the country, and we expect the figures to rise again with the introduction of new programs this year,” Khater Abi Habib told The Daily Star.

When asked whether the tougher economic situation in 2011 and the beginning of 2012 had impacted Kafalat, Abi Habib said it had only led to a modest slowdown of growth in the number of requested loans.

“There was only a small drop in overall figures,” he added. In 2010, Kafalat loan guarantees reached $167 million, significantly up from $139.6 million in 2009.

Kafalat is a company that lends a hand to local SMEs, enabling them to access finance from commercial banks at reduced interest rates. It provides loan guarantees based on applicants’ business plans and feasibility studies.

This allows startups and existing SMEs to access finance without the need to match the loan with collaterals normally required by banks.

In addition to Kafalat Basic and Kafalat Plus loan-guarantee schemes, which aim at helping SMEs in the industry, tourism, agriculture, crafts and technology sectors, Abi Habib said his company has also been developing new programs.

“Kafalat Innovative” helps SMEs with ideas for inventive products to realize their plans. It guarantees 90 percent of loans, therefore reducing business risks to a mere 10 percent.

Abi Habib said Kafalat is extending support to SMEs willing to invest in renewable energy through a brand new program funded by the EU.

“‘Kafalat Energy’ extends the duration of the loans to 10 and 15 years respectively and extends the grace period by up to two years for investments in renewable electricity,” he explained.

Kafalat has been also keen to develop programs tailored for SMEs in the agricultural sector, Abi Habib added.

He highlighted “Kafalat Tree,” a program which extends the duration of loans made to tree plantations by up to seven years.

According to Abi Habib, around half of Kafalat loans are granted to businesses in Beirut and Mount Lebanon.

“It is logical for SMEs to be based where their manpower and clients are concentrated, such as Mount Lebanon and Beirut. However, Beirut and Mount Lebanon account only for half of the guarantees issued. It is about 50 percent,” he explains.

When asked about ways to encourage entrepreneurship in rural areas, Abi Habib said there is a need to establish and promote awareness among Lebanon’s rural population.

Awareness campaigns should highlight the importance of developing entrepreneur skills in rural areas where business opportunities exist.

“This starts by educating the young generation that has not yet migrated to the city and introducing them to available facilities,” he said.

Banks should also branch out more into rural areas, where there operations are still limited.

Another key issue, according to Habib, is the simplification and development of the commercial code, which he said should be urgently addressed.

“This is particularly relevant to encourage startups in innovative technology-based SMEs,” he said.

However, Lebanon has a long way to go before it can boast a thriving tech community as the country suffers one of the slowest Internet connections in the world, despite signs that it might be improving, analysts say. Analysts say investors are beginning to take an interest in startups and a handful of technology entrepreneurs are opting to stay in Lebanon despite adverse conditions.

Other than a well-drafted realistic business plan, an applicant to Kafalat does not require much, Abu Habib said.

“The applicant should abide by legal requirements including permits from municipalities and ministries, as well as official rental contracts. Kafalat then takes into consideration the potential growth the loan will generate to the applicant’s business,” he added.